Mark Evans

More Love for Nortel in India?

CIBC World Markets analysts Steve Kamman believes Nortel could get some more love from Indian wireless carrier BSNL, which is expected to unveil a $3-billion RFP soon. The contract would involve a two to three year period and could provide Nortel with more than $500 million of new revenue. It would also let Nortel recoup some or all of the losses (estimated to be around $190 million) from its first $500-million deal with BSNL. Kamman, however, expects BSNL could use three suppliers (Nortel, Nokia and Alcatel with Nokia being the core vendor), which may see Nortel to lose money on the next BSNL deal if it wants to outbid Alcatel for business. More important, Kamman questions whether Nortel can in the long-term achieve enough scale in GSM in the Indian market. “It is worrying to see this battle coming down to a battle for 10% share in a developing market such as India where today's $9 ARPU's are trending to under $3.” As the Dominion Bond Rating Service said yesterday, Nortel's ability to grow revenue and compete could depend on new leading-edge technology - an area that Nortel is looking to reduce as tries to rein in operating costs. As much as Nortel CEO Bill Owens wants to focus on international markets such as India and China, it will be hard to make money from this business if you're selling is low margin equipment in an ultra-competitive market. This is one of the reasons why Nortel needs to seriously look at acquiring companies with bleeding or leading edge technology. In other words, they should examinet Cisco's operating model, or for that matter Google's, on how to enhance your technology portfolio without blowing your brains out financially.